In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee (DBCC), during its meeting on 22 December 2017, decided to keep the current inflation target at 3.0 percent ± 1.0 percentage point for 2018 – 2020. The government’s inflation target is defined in terms of the average year-on-year change in the consumer price index (CPI) over the calendar year.
The current manageable inflation environment could be sustained over the medium term. Inflation projections and expectations continue to indicate that inflation could settle within the current inflation target, although there are upside risks to the inflation outlook. Moreover, the inflationary impact of the potential increases in international commodity prices is assessed to be moderate, supported by lower pass-through to inflation of exchange rate and external commodity price inflation. Expectations of healthy economic growth alongside the tax reform program would create demand-side impetus to inflation. Nonetheless, the favorable effect of sustained investment spending by the National Government on the economy’s productive capacity would help temper inflation pressures.
The medium-term inflation target is set by the DBCC in coordination with the BSP under the inflation targeting framework. The announcement of the target is in line with the BSP’s commitment to greater transparency and accountability in the conduct of monetary policy. The BSP will continue to ensure that the monetary policy stance remains appropriate, consistent with its primary mandate of safeguarding price stability conducive to a balanced and sustainable economic growth.